May 09, 2012

Exponential Engineer Meets Finite Physicist

I think the answer to this question is obviously, "Yes." Let's start with the basics: what is GDP? It's the total value of goods and services produced in a given year. And since "value" is not a physical thing, U.S. and world GDP can obviously grow to 100+ times their present values. In fact, I think this is likely by the year 2100, as noted here:

Let's take an example: From roughly 1980 to 2010, Bill Gates' net worth (his "value") increased by on on order of a billion dollars per year. Or let's put it another way: let's say in 1980, his net worth was under $3 million. And by 2010, his net worth was around $30 billion. So over that 30-year period, his "value" increased by a factor of about 10,000. But did anything *physical* associated with him increase by a factor of 10,000? Did he use 10,000 times as much energy, for instance? No, he didn't. (He's not Al Gore, after all. ;-))

So the question is, "Could everyone in the world have the wealth of Bill Gates?" I think the answer not only is "yes," but that would be a wonderful thing.

But let's get to some of the specifics mentioned by Tom Murphy in his post and his responses to comments. His comments on that post are closed, so I'm responding here:

Earth’s physical resources—particularly energy—are limited and may prohibit continued growth within centuries, or possibly much shorter depending on the choices we make.

"Within centuries" is a pretty long time. Regarding the vague, "possibly much shorter," I'd need to know what "possibly much shorter" meant, in order to comment. Do you mean that GDP will stop growing in 80 years? 50 years? 30 years?

So we would likely agree that energy growth will not continue indefinitely.

OK, the economist, the physicist, and the engineer all agree on something. So it must be right. ;-)

First, I’ll just mention that energy growth has far outstripped population growth, so that per-capita energy use has surged dramatically over time—our energy lives today are far richer than those of our great-great-grandparents a century ago [economist nods].

Yes, our energy use per capita has increased from a century ago. But U.S. per capita energy consumption in 2010 is actually lower than it was in 1974:

Again, the physicist, the economist, and the engineer agree. So it must be right. ;-)

"...but the virtual environment probably also requires a supercomputer—by today’s standards—for every virtual voyager. The supercomputer at UCSD consumes something like 5 MW of power. Granted, we can expect improvement on this end, but today’s supercomputer eats 50,000 times as much as a person does, so there is a big gulf to cross. I’ll take some convincing.

OK. The energy use per calculation of computers is coming down by a factor of 100 every decade. It has been for several decades, and appears likely to for the forseeable furture. If today's supercomputers take 50,000 times as much power as a person does, in roughly 23 years, that same supercomputer computing power (i.e., calculations per second) will take only as much electrical power as a person does.

And as long as there are any holdouts, the plan of squeezing energy requirements to some arbitrarily low level fails. Not to mention meeting fixed bio-energy needs.

I'm not sure what "some arbitrarily low level" means. Let's say the world population peaks at 15 billion, and all of them use the energy that the average person in the U.S. uses now (about 10,000 Watts continuously, or 87,600 kWh per year...315 GJ per year). (Check my math.) So that would be about 5,400 quadrillion Btus (quads). Is this not possible? If this is not possible, why is it not possible?

Let’s imagine a world of steady population and steady energy use. I think we’ve both agreed on these physically-imposed parameters. If the flow of energy is fixed, but we posit continued economic growth, then GDP continues to grow while energy remains at a fixed scale. This means that energy—a physically-constrained resource, mind—must become arbitrarily cheap as GDP continues to grow and leave energy in the dust.

Yes, that's right.

How far do you imagine this can go? Will energy get to 1% of GDP? 0.1%? Is there a limit?

No, there is no limit.

But if energy became arbitrarily cheap, someone could buy all of it, and suddenly the activities that comprise the economy would grind to a halt.

This is an error of logic that many people seem to make. I'll give an analogy to illustrate why it's erroneous. Food is inexpensive, and has been getting less expensive in the developed countries for several centuries. Does this mean that "...someone could buy all of it, and suddenly the activities comprise the economy would grind to a halt." Of course not. Food is cheap. That means that, even if it were even possible to buy all the food in the world--any more than it would ever be possible to buy all the energy in the world--then someone would just create more. Why? Because plenty of people know how to create food...or energy. And if it was no longer inexpensive, there'd be an incentive to create it.

Physicist: But is there a floor? How low are you willing to take it? 5%? 2%? 1%?

Economist: Let’s say 1%.

Why should we say 1%? What evidence is there that energy use can't be less than 1% of GDP? Bill Gates' "value" (his "personal domestic product," if you will) increased by $1 billion per year from 1980 to 2010. Does anyone think he spent anywhere near 1% of that ($10 million per year) on energy? No, of course not.

Economist: Yes, I have to retract that statement. If energy is indeed capped at a steady annual amount, then it is important enough to other economic activities that it would not be allowed to slip into economic obscurity.

I'm not sure why any economist would say this. I don't know what part of economic thought is leading him to that conclusion. Things that were previously economically important "slip into economic obscurity" all the time. It used to be horses were hugely economically important. They're not economically important now, except perhaps to the extremely small part of the population involved in horse racing. Similarly, whale oil used to be hugely economically important. It's not now. Polaroid and Kodak used to be huge; they're not now. Things "slip into economic obscurity" all the time. As energy is likely to do.

Physicist: Even early economists like Adam Smith foresaw economic growth as a temporary phase lasting maybe a few hundred years, ultimately limited by land (which is where energy was obtained in that day).

The early economists were wrong about many things, just as the physicists of their time were wrong about many things (e.g., that time was the independent of one's inertial reference frame).

The economists who devise a functioning steady-state economic system stand to be remembered for a longer eternity than the growth dudes. [Economist stares into the distance as he contemplates this alluring thought.]

Economists who "devise a functioning steady-state economics system"? Economists study economies. They can no more "design" economies than physicists (or even engineers ;-)) can.

But I’m thinking more of a zero-sum game here. Fads come and go. Some fraction of GDP will always go toward the fad/innovation/gizmo of the day, but while one fad grows, another fades and withers. Innovation therefore will maintain a certain flow in the economy, but not necessarily growth.

Once again, GDP is the total value of goods and services in an economy. There is no reason to expect that the absolute value of certain goods and services increasing causes the absolutely value of others to decrease by an equal amount. That hasn't been happening for the last 500+ years (using, say, a 20-year rolling average). That is, the world economy has been increasing (using, say, a 20-year rolling average) for the last 500+ years. So the claim that the world economy will remain flat in the future is an extraordinary claim that requires extraordinary evidence. Evidence that has yet to be provided.

[I'll share a little-known secret. It's hard to beat a Hostess Ding Dong for dessert. At 5% the cost of fancy desserts, it's not clear how much value the fancy things add.]

If a person freely pays $100 for a dessert, that dessert has $100 of value to that person at that time. It's fine to offer the thought that the person was a dope to spend so much for a dessert. But that doesn't change the fact that its value would be recorded as $100 when calculating GDP.

Finally, even having accepted the limits to energy growth, he initially believed this would prove to be of little consequence to the greater economy. But he had to ultimately admit to a floor on energy price and therefore an end to traditional growth in GDP—against a backdrop fixed energy.

Yes, he "admitted" something that wasn't true. That's very puzzling.

The conversation recreated here did challenge my own understanding as well. I spent the rest of the evening pondering the question: “Under a model in which GDP is fixed—under conditions of stable energy, stable population, steady-state economy: if we accumulate knowledge, improve the quality of life, and thus create an unambiguously more desirable world within which to live, doesn’t this constitute a form of economic growth?”

If GDP is "fixed," then by definition the total value of goods and services is not increasing. But there is nothing in your conversation that gives evidence to the proposition that GDP will ever be "fixed." Your whole argument is based on the proposition that the value of energy relative to the total economy can never drop below 1%, which is a totally arbitrary and unsupported proposition.

I had to concede that yes—it does. This often falls under the title of “development” rather than “growth.” I ran into the economist the next day and we continued the conversation, wrapping up loose ends that were cut short by the keynote speech. I related to him my still-forming position that yes, we can continue tweaking quality of life under a steady regime. I don’t think I ever would have explicitly thought otherwise, but I did not consider this to be a form of economic growth.

If the quality of life is increasing, it's hard to believe the total value of goods and services is not increasing. And in fact, the only place the GDP is not increasing is in your hypothetical world of the future, because, as I noted previously, world GDP has been increasing for more than 500 years (on, say, a 20-year rolling average).

This conversation is my contribution to a series at www.growthbusters.org honoring the 40th anniversary of the Limits to Growth study.

"So this would be of tremendous value to me, but it need not involve much additional energy (at least compared to the first ~80 years of life)."

Living *forever* would in fact need infinite additional energy.

"There's no limit to energy's percent of GDP because GDP is based on "value," which is not a physical parameter. Therefore, "value" can approach infinity."

I do think all actual forms of value are reducible to physical implementations and therefore strictly bound by physical parameters. Even the subjective perception of value (i.e. pleasure) needs a physical implementation that has ultimate limits in energy-efficiency. I agree mindboggling growth is possible here, but unless you can acquire literally infinite physical resources, value of this or any other relevant type conceivable by me cannot approach infinity.

There's no limit to energy's percent of GDP because GDP is based on "value," which is not a physical parameter. Therefore, "value" can approach infinity.

For example, a new store in the mall near me is called, "Forever 21." What would be the value to you of you and all your loved ones being able to live forever in the best physical condition you were ever in? The older you are, the higher the value you would probably assign to this...but I'd definitely give up all my retirement savings for such a situation. So this would be of tremendous value to me, but it need not involve much additional energy (at least compared to the first ~80 years of life). It could consist simply of monitoring and repairing damage immediately within the body.

In fact, many of the improvements that could raise GDP could lower net energy usage. For example, if you could wear clothing that would keep you comfortable at all times, there would be no need to heat or cool your house. Similarly, Tom Murphy writes about the various energy use levels for foods:

"I had heard from multiple sources that eating meat carried a large energy tax, amounting to as much as 8× for beef, 5× for pork, and something like 2× for chicken and fish. I have not been able to track down this original source, but the sentiment was almost certainly correct if not the numerical factors. In any case, I switched to a primarily meat-free diet."

However, it may be possible within the near future to "grow" meat in a laboratory that is essentially no different from meat obtained by growing and killing animals: